Future Looks Grim for Travel Industry

 
 
By eweek  |  Posted 2001-09-24 Print this article Print
 
 
 
 
 
 
 

In the immediate aftermath of the terrorist attack on New York and Washington, D.C., virtually every trade show in the country was cancelled for remainder of September and early October. But in a troubling sign that the impact may linger, some events sche

In the immediate aftermath of the terrorist attack on New York and Washington, D.C., virtually every trade show in the country was cancelled for remainder of September and early October. But in a troubling sign that the impact may linger, some events scheduled for later in the year are also falling off the boards. Citing customers need to reduce discretionary travel, the software firm Veritas called off this years Vision 2001, scheduled for Nov. 4 to 8 in Dallas. "Given the circumstances, Veritas appreciates that our end users and partners will be placing priority focus on restoring their business operations, strengthening their ability to support their customers, and on personal level, delaying non-essential travel to reassure family and friends," a Veritas statement read. The company has rescheduled the event for April 2002.
While trade shows represent just one element of business travel, industry insiders expect others to follow. A survey by the National Business Travel Association indicates that 58 percent of corporate travel managers say their companies will reduce travel, while 23 percent were unsure. Only 19 percent were not planning to curtail travel. Of those calling off travel plans, 65 percent are doing so immediately.
However, comments received by the NBTA indicated that some travel cancellation initiatives are the result not of last weeks terrorist attacks, but of previous cost-cutting measures. Air transportation typically accounts for 49 percent of all corporate travel expenditures, evidence of its importance to the business travel community, according to the National Business Travel Association. Total business travel spending was close to $185 billion in 2000. When businesses reduce travel because of a traumatic event, leisure travelers stay away in droves. Airlines rely on business travel for the bulk of their income and offer lower fares to leisure travelers to fill the rest of the plane for incremental revenue. It didnt take long for airlines to feel the effects after four wide-body jets were hijacked and three were used as kamikaze bombers. In less than two weeks, the schedules were cut by 20 percent and 100,000 employees were laid off. Major carriers, including American, Continental, TWA, United and US Airways suspended their Internet-only discount fares, another blow to the popular electronic ticketing process. Most Internet fares provide an e-ticket that in the past allowed the purchaser to simply show up at the gate with picture identification. With new security measures, the buyer must now bring a printout of the e-ticket purchase and may be required to check in at the main terminal before heading to the gate. Some of the Internet specials were designed to fill empty seats with last-minute bargain fares. The airline industry has reported losing at least $1 billion since last week, with little hope of recovery in time for the important holiday travel season. While the airlines can anticipate a federal bailout to keep them in business, the other components of the travel industry must find a way to survive on their own. "It is the most horrific, horrendous thing that has happened to this industry since its beginning," said Richard Copland, president of the American Society of Travel Agents. "This whole industry needs help." American Express, the nations largest travel services company, immediately lowered its third-quarter earnings estimates after the attack, even though only 19 days were left in the quarter when the terrorists struck. American Express also suffered the temporary loss of its headquarters in lower Manhattans World Financial Center, adjacent to the World Trade Center. While the building is believed to be structurally sound, damage from the collapse will keep it out of commission for several months. The company, which conducts much of its business online, reassured customers that all data and transactions were safe. For online-only travel services, the attacks marked a sudden downturn in a year of mixed indicators. Among the first online casualties of the terrorist attack was Biztravel (www.biztravel.com), which announced it was shutting down after laying off its remaining staff at the end of last week. "Biztravel has been unable to overcome the challenges of the economic downturn, the further-reduced demand for travel resulting from the tragedy of Sept. 11, 2001, and the ever-increasing economic pressures of the travel industry," Marc Kaelin, vice president, said in a statement. Priceline.com, battling to come back from deep losses, actually reported a quarterly profit before the tragedy. Expedia reported that in the first five days after the attacks, bookings were between 35 percent and 40 percent of the previous weeks. On Sept. 17, reservations rose to 45 percent of the same day the previous week. The figures do not include flight cancellations. "In light of last weeks tragedies, we believe our early booking levels are an encouraging indication of the resilience of the American spirit," said Richard N. Barton, president and CEO of Expedia. Like the other major travel services, Expedia overhauled its Web site into a disaster relief information center, with details on travel, airport security and links to charities aiding the victims. Meanwhile, Expedia confirmed that it continued to work with Barry Dillers USA Network, which earlier this year announced plans to acquire the online travel agency. Dillers other travel-related Web site, Hotel Reservations Network, provided $1 of every booking to relief organizations and used its reservations center to assist stranded travelers.
 
 
 
 
 
 
 
 
 
 
 

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